The parliament in Iceland has formally approved a plan to reimburse savers in Britain and the Netherlands for the billions they lost when Iceland’s banks imploded last year.

The issue has sparked weeks of rancour and soul-searching inside and outside parliament. But the bill’s adoption is seen as the first step along the road to repairing Iceland’s damaged economic reputation. Some 400,000 savers had put their money in high-interest online accounts run by one of Iceland’s leading commercial banks. They lost billions when Icesave collapsed last year. The global economic crisis has already hit Iceland hard and many people don’t see why the taxpayer should bail out a private bank and its savers. Critics of Reykjavik’s decision to join the European Union may use the furore to stoke simmering anti-Brussels sentiment.More about: Banking, Iceland, United Kingdom

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